Update 2 | Chinese deal signed, parliament to discuss agreement on Wednesday

Malta-China deal concluded • Video by Chris Mangion

The energy ministry today signed the final agreement between Enemalta and Chinese-state owned company Shanghai Electric Power that will see the Chinese state-owned firm become the operator of the Delimara power station extension – the BWSC plant – following a €320 million capital injection.

Energy Minister Konrad Mizzi said he felt honoured and proud with the deal signed, "the biggest investment ever achieved by Malta".

The deal will see €250 million coming in this year: €100 million which will be injected directly into Enemalta and €150 million for the Delimara 3 plant (BWSC plant). €70 million will be invested next year for the conversion of the plant to gas.

Prime Minister Joseph Muscat hailed the agreement as a witness to Malta's ability to turn a challenge into an opportunity: "From an albatross round the country's neck, to an Enemalta which is seeking investment and new opportunities."

Muscat noted that the signing of the deal came on the eve of Malta's 40th Republic Day anniversary.

"To Enemalta's workers and their families, I tell them that this investment not only saved their jobs but new opportunities will be created. This is just the start. The future will always hold challenges but Malta is ready to face them," Muscat said.

As sound from the celebrations of graduating students reached Auberge de Castille, Muscat quipped that "as students celebrate their achievements, so do we".

The two sides will be also investing in renewable energy, eyeing opportunities abroad.

SEP chairman Yundan Wang said he was honored to witness this milestone: "Since the very beginning, this agreement has generated interest from both Malta and abroad. This project is not only our first step in Europe but also consistent with long-term investment."

He said that the signing ceremony was nit the end but the start of a collaboration to provide sustainable and clean energy, making contributions to social welfare and ensure efficiency.

Closing his speech with "a Merry Christmas", Wang said he looked forward to a fruitful collaboration with the Maltese government.

The signing ceremony was also addressed by Lu Quizhou, president of China Power Investment, SEP's mother company. He said, that CPI had chosen Malta as its "initial step" of the European strategy because of the island's geographical location and the a business-friendly environment.

Quizhou also wished the Maltese a Merry  Christmas and a happy Republic Day.

Through the agreement, the Delimara 3 plant has been moved to a newly set up company - the Delimara 3 Power Generation - which is 90% owned by SEP and 10% owned by Enemalta.

The agreement reached between the two sides means that it will be up to a technical committee appointed by Enemalta to determine the dispatch function, meaning that Enemalta will decide the amount of energy to be bought from Delimara 3 and the gas plant to be developed by ElectroGas.

In other words, according to Konrad Mizzi, SEP will operate Delimara 3 on dispatch instructions.

Although the unit cost of electricity to be bought by Enemalta from SEP and ElectroGas will not be made public at this stage, the difference between the two is down to "mills", the energy minister told MaltaToday.

"The difference is that there is a different level of efficiency between Delimara 3 and the ElectroGas plant, in that the latter will be more efficient," Mizzi said. 

The price is fixed for five years and SEP will be buying gas from ElectroGas.

Although there exists the possibility of Enemalta exporting energy abroad, through the interconnector, at this stage this remains "a consideration" that will be determined by the market prices at a European level.

According to new timeframes announced by Energy Minister Konrad Mizzi, Malta will be making use of gas-generated electricity by June 2016. A 200MW interconnector connecting Malta to the European grid will be commissioned in early 2015 as works on the interconnector are in their final stages.

The June 2016 deadline also means that the BWSC plant would have been converted to gas while the ElectroGas plant is up and running.

Around 50% of Malta’s required electricity will be generated by the ElectroGas consortium, while the BWSC plant – to be converted to gas by Shanghai Electric Power – would cater for 30% while the interconnector would provide for the rest of the 20% of the energy mix.

The agreement with the Chinese state-owned company does not dictate the energy dispatch that Enemalta should buy from the converted the Delimara plant 3 – the BWSC plant – but it will be up to a technical committee to decide this. Plant 3 will be converted to gas by SEP. The €320 million cash injection in Enemalta meant that SEP will acquire a 33% stake in the company.

Mizzi says government's targets reached

In a press conference addressed after the signing, Mizzi reiterated that the government was proud that in a relatively short period the deal was concluded.

"Our target to close this deal before end of year has been met. It was important for Enemalta, for the government and the country's finances after credit rating agencies emphasised the importance of this deal," he said.

Flanked by Enemalta chairman Frederick Azzopardi and former chairman Charles Mangion, Mizzi said Enemalta's board of directors will comprise of four members appointed by Enemalta and two appointed by SEP. The chairman will be Maltese while the deputy chairman will be Chinese.

As to Enemalta's debt, SEP are contractually bound to make good for 33% of the bank guarantees. Estimates are that debt will go down to under €300 million, he said.
The Delimara 3 plant will be made up of eight machines, which could easily switch from gas to gasoil if the need arises.

"As government we have insisted that Enemalta retains dispatch rights. There are no contractual obligations for Enemalta to buy a minimum output from Delimara 3," he said.
Two companies have also been set up by which government and SEP will invest in renewable energy and service renewable energy centres in Europe, Mediterranean, Gulf and Africa.

The first project will be the development of a 300MW renewable energy project through solar and wind farms. A small pilot project will be developed in Malta but the bulk of renewable energy for use in Malta will be left in the private sector's hands.

The two companies are International Renewable Energy Development and International Energy Services Centre Ltd.

"Credit rating agencies and banks were insisting that this deal is to be finalised as soon as possible; on their part, SEP said this was one of the very few agreements that were agreed to in a relatively short timeframe."

It was also agreed that labouring and human resources are to be handled by the Maltese team.

"We not only improved Enemalta's financial situation but we also addressed the past legacy of high debts," Mizzi said.

The minister said that the investment agreement will be tabled in parliament and discussed next Wednesday.